News Room»A guide to Alberta’s new $15 minimum wage and what it will mean for the economy

A guide to Alberta’s new $15 minimum wage and what it will mean for the economy

by AFL22scon October 01, 2018

EDMONTON—On Monday, Alberta became the first province in Canada to raise the minimum wage to $15 an hour, fulfilling a long-standing NDP promise to raise it, in stages, from $10.20 starting back in 2015.

EDMONTON—On Monday, Alberta became the first province in Canada to raise the minimum wage to $15 an hour, fulfilling a long-standing NDP promise to raise it, in stages, from $10.20 starting back in 2015.

The increase means a raise for roughly 300,000 workers around the province, according to Public Interest Alberta’s 2018 Low Wage Report. More than 60 per cent of those who benefit are women, and three quarters of them are 20 years old or older.

While the full consequences won’t be completely clear for years, that hasn’t stopped many observers from picking a side on the issue.

Workers’ groups and unions have praised the policy, arguing it will reduce poverty and improve quality of life for the province’s most vulnerable. Meanwhile, the Canadian Federation of Independent Business called for a freeze at $13.60, saying it would prove an unfair burden to businesses with already thin margins.

Trevor Tombe, an assistant professor at the University of Calgary’s department of economics, said both sides are guilty of oversimplification.

“Bold claims there will be tens of thousands of jobs lost are false. Bold claims that there will be no jobs lost? That’s false, too,” Tombe said.

The actual impact of Alberta’s minimum wage increase won’t be felt as acutely as in other provinces, Tombe argues. Because Alberta has the highest average wage in the country, an increase to the very bottom isn’t as much of a shock. Raises in provinces with lower average wages — such as Ontario, which raised its minimum wage to $14 an hour last January — tend to “bite more,” Tombe said.

Union leaders such as Gil McGowan, president of the Alberta Federation of Labour, hailed Monday’s increase as a win for minimum-wage workers across Alberta — as well as the economy. With more money in their pockets, he said, workers can now afford to buy more.

He added that the provincial government’s minimum-wage increases have been a crucial part of Alberta’s economic recovery from the 2014 oil crash. Back in 2015, when the NDP first announced the policy, he recalled business associations “complaining the sky would fall” as a result.

“To say that they were wrong would be an understatement,” McGowan said. “Instead of those predicted job losses, what we’ve seen is that the service sector has added jobs even while the minimum wage has steadily increased.”

But University of Alberta economics professor Joseph Marchand said that while studies and numbers on the effects of the increase abound, your evaluation ultimately depends on what your desired outcome is: job growth or decreasing inequality.

“If that’s your social goal, reducing inequality amongst individuals, I buy it,” Marchand said. “We will see it in the data. I would almost guarantee it, there is going to be a reduction in inequality.”

However, he doesn’t buy into the idea that it would help the employment rate. The messaging he’s seen from the NDP government is that there has been job growth since the minimum wage started rising in 2015. Yet, Marchand said increasing the minimum wage should lead directly to job losses as businesses become reluctant to hire.

Proponents have pointed to job growth in certain industries as evidence that the minimum wage isn’t hurting the economy — but Marchand countered that by saying in Alberta the job market is heavily influenced by the price of oil. Thus, the true effect of a higher minimum wage will likely be obscured.

Still, his research leads him to believe that roughly 25,000 jobs will be lost in Alberta as a result, although Marchand cautions it could be more or less than that; we won’t know for a year or two.

Many observers, he said, like to compare Alberta’s minimum-wage hike to the situations in New York, California or Seattle. But since Alberta’s labour market is so tied to energy boom-and-bust cycles, it’s a different beast, Marchand said.

Not only that, he said, the way the NDP has rolled out the minimum wage is different — the State of New York let big cities have the raise before implementing it in Buffalo, Syracuse or other smaller areas. This move could have been implemented in Edmonton or Calgary to see the effects on cities with higher costs of living before rolling it into rural areas.

Marchand said business owners in less populated areas could make less money and be more averse to hiring labour at a higher price. They could have also benefitted from having more time to adjust their businesses to the higher cost of labour.

California had a clause in its policy that said it wouldn’t increase the minimum wage during an economic recession to keep pressures on business owners down. Marchand said Alberta did the opposite and introduced a hike in the middle of a downturn.

Despite all the debate, Tombe said there’s one key aspect missing from the mainstream discussion: why it’s going up. The provincial government has said the increase will ensure low-income families are better able to provide for themselves.

“There’s more than one tool to achieve that goal,” Tombe said. “I think the debate would be better served if instead of just arguing over the minimum, we entertained other solutions to improving the situation of low-income folks.”

These could include tools like income transfers — Tombe listed the Alberta Child Benefit and income tax credits as examples — to shave expenses off of low-income Albertans struggling to pay their bills. Minimum-wage increases can put more money in workers’ pockets, but Tombe said they aren’t very focused.

“The minimum wage is a very blunt tool because it affects everybody, regardless of their individual circumstances or characteristics,” Tombe said.

He said Canadian research shows a modest effect on the employment of teenage workers and a very small effect for young adults. U.S. research has shown “close to zero effects” in some areas that have raised the minimum wage, while other areas have seen larger effects. In other words, the jury’s still out — but he said Alberta at least hasn’t taken much of a hit during past increases.

“There’s no strong evidence yet that any of the prior increases have had a negative effect,” Tombe said. “Now, that’s not to say that future increases won’t.”

Kieran Leavitt is an Edmonton-based reporter. Follow him on Twitter:@kieranleavitt

Brennan Doherty is a work and wealth reporter with StarMetro Calgary. Follow him on Twitter:@bren_doherty